Salesforce projects weak sales growth, fuelling AI anxiety

Salesforce projected lacklustre quarterly sales growth, suggesting its artificial intelligence (AI) product is not yet paying off as quickly as hoped amid competition from emerging AI companies.

Revenue will be US$10.2 billion to US$10.3 billion in the period ending in October, the company said on Wednesday (Sep 3). Analysts, on average, estimated US$10.3 billion. Current remaining performance obligations, a measure of bookings, will increase “slightly above” 10 per cent, in line with analysts’ average projections.

Investors have been increasingly anxious that incumbent software makers will be outshined by new AI-based vendors. Companies such as Salesforce, which make applications that are charged per user, have faced the steepest scepticism because of the view that AI will take over some of the tasks they provide and reduce the workforce of their customers.

“Investors will have to look at the qualitative Agentforce numbers and wait for the Dreamforce conference next month to increase their enthusiasm,” Raimo Lenschow, an analyst at Barclays, wrote in a note after the results.

Salesforce is trying to get clients to use its Agentforce AI tool, which can complete tasks such as sales development without human supervision. The leading provider of customer management software launched the product late last year and said that it has closed more than 6,000 paid deals since then. In May, Salesforce said the tool had US$100 million in annual recurring revenue. The company did not update that figure on Wednesday.

It’s taking time for large businesses and regulated industries to feel comfortable implementing AI tools, chief financial and operating officer Robin Washington said in an interview after the results were released. Salesforce added more pricing options and hired additional salespeople to help fuel adoption, she said.

The shares fell about 4.5 per cent in extended trading after closing at US$256.45 in New York. The stock has dropped 23 per cent this year to Wednesday’s close as “the AI disruption narrative grows louder”, wrote Keith Weiss, an analyst at Morgan Stanley, in a note before the results were released.

Fiscal second-quarter revenue increased 9.8 per cent to US$10.2 billion. Current remaining performance obligations rose 11 per cent to US$29.4 billion. Profit, excluding some items, was US$2.91 per share. Analysts had estimated a profit of US$2.78 a share on US$10.1 billion revenue, according to data compiled by Bloomberg.

The company also announced it would add US$20 billion to its existing share buyback programme, raising the total authorised to US$50 billion. BLOOMBERG